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Office Depot, Inc. v. Cook

United States District Court, D. Delaware

March 3, 2017

OFFICE DEPOT, INC., and NORTH AMERICAN CARD AND COUPON SERVICES, LLC, Plaintiffs,
v.
THOMAS COOK, in his capacity as the Secretary of Finance for the State of Delaware; DAVID M. GREGOR, in his capacity as the Delaware State Escheator; and MICHELLE M. WHITAKER in her capacity as the Delaware Abandoned Property Audit Manager, Defendants.

          Rudolf E. Hutz, R. Eric Hutz, REED SMITH LLP, Wilmington, DE Diane Green-Kelly, REED SMITH LLP, Chicago, IL Attorneys for Plaintiffs.

          Jennifer R. Noel, Caroline Lee Cross, Delaware Department of Justice, Wilmington, DE Attorneys for Defendants.

          Steven Rosenthal, Tiffany R. Moseley, J.D. Taliaferro, LOEB & LOEB LLP, Washington, DC Marc S. Cohen, LOEB & LOEB LLP, Los Angeles, CA Attorneys for Defendant Thomas Cook.

          MEMORANDUM OPINION

          STARK, U.S. DISTRICT JUDGE.

         I. INTRODUCTION

         On July 18, 2016, Plaintiffs Office Depot, Inc. ("Office Depot") and North American Card and Coupon Services, LLC ("NACCS" and, collectively, "Plaintiffs") filed a complaint ("Complaint") against Defendants Thomas Cook ("Cook"), in his capacity as the Secretary of Finance for the State of Delaware; David M. Gregor ("Gregor"), in his capacity as the State Escheator of the State of Delaware; and Michelle M. Whitaker, in her capacity as the Audit Manager for the State of Delaware ("Whitaker" and, collectively, "Defendants"). (D.I. 1) The Complaint alleges that Delaware's Unclaimed Property Law, Del. Code Ann. tit. 12, § 1101 (2016) ("DUPL"), "violates and is preempted by federal common law." (Id. ¶¶ 1, 76) It further alleges that Defendants' actions pursuant to the DUPL have violated Plaintiffs' rights under the Fourth Amendment to the United States Constitution. (See Id. ¶¶ 1, 89)

         On October 28, 2016, Defendants filed a motion to dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction and for failure to state a claim ("Motion"). (D.I. 22) Briefing on Defendants' Motion was completed on December 9, 2016. (D.I. 23, 24, 26)

         For the reasons that follow, the Court will grant Defendants' Motion.

         II. BACKGROUND[1]

         Escheat is a procedure through which "a sovereign may acquire title to abandoned property if after a number of years no rightful owner appears." Texas v. New Jersey, 379 U.S. 674, 675 (1965). Delaware's escheat law authorizes the State Escheator to claim unclaimed property and to conduct examinations of companies' books and records. See generally Del. Code Ann. tit. 12, §1155(2016).

         Plaintiff Office Depot is a corporation organized under Delaware law, and Plaintiff NACCS is a limited liability company organized under Virginia law. (See D.I. 1 ¶¶ 5-6) Office Depot and NACCS are parties to a Gift Card, Gift Certificate, and Merchandise Credit Agreement, pursuant to which "NACCS appointed Office Depot as an agent... to promote and sell NACCS's gift cards, gift certificates, and merchandise credits using trademarks and trade names owned by Office Depot in exchange for a 1% commission." (Id. ¶ 36) Office Depot and NACCS are also parties to a Conveyance Agreement, under which NACCS has "acquired the assets and assumed the liabilities of Office Depot's gift card and gift certificate business." (Id. ¶ 37)

         On February 6, 2013, Defendants began an audit of Office Depot's compliance with Delaware's escheat law. (See Id. ¶ 39) Using Kelmar Associates, LLC ("Kelmar"), an auditing firm, as their agent, Defendants requested "voluminous detailed financial records" for periods back to 1995 and also requested "copies of unclaimed property reports filed in all states for the entire audit period." (Id. ¶¶ 40, 45) Office Depot objected to producing documents that predated the statute of limitations and to producing "copies of unclaimed property filings in states not participating in the examination." (Id. ¶¶ 40, 45)

         On September 3, 2014, Kelmar asked NACCS to produce "extensive detailed information ... relat[ing] to NACCS's gift card, gift certificate, and merchandise credit business." (Id. ¶ 43) "Plaintiffs responded by producing ... NACCS's [l]imited [l]iability [a]greement to demonstrate that NACCS" was organized in Virginia and further produced all of NACCS's general ledger accounts. (Id. ¶44) On September 15, 2015, Kelmar again requested "voluminous detailed information concerning NACCS's gift cards, gift certificates, and merchandise credits business, ... irrespective of the card issuer" being Office Depot, NACCS, or any other party. (Id. ¶ 49)

         Plaintiffs did not produce any documents pursuant to Kelmar's September 15, 2015 request. (See Id. ¶ 50) Thus, on January 26, 2016, Kelmar sent a letter' to-Office Depot stating that "Office Depot's continued failure to provide the requested information will result in the Office referring the matter to the Attorney General's Office for consideration of enforcement action." (Id. (internal quotation marks omitted))

         On February 11, 2016, Defendant Whitaker "sent a letter to Office Depot, listing several other documents that Office Depot had not produced in the examination, including copies of... unclaimed property reports filed in other states for.... years 1995 and forward." (Id. ¶ 55) In response, Plaintiffs' counsel sent a letter to Whitaker, arguing that most of the information sought by Defendants "concerns property for which Delaware lacks standing to claim." (Id. ¶ 56) Plaintiffs' letter further argued that most of Defendants' requests were barred under the statute of limitations. (See id.)

         As a consequence of not submitting all of the documents Defendants sought, Plaintiffs received an email from Kelmar on June 24, 2016, notifying Plaintiffs that "th[e] matter had been referred to" the Attorney General's Office. (Id. ¶ 57 (internal quotation marks omitted))

         Plaintiffs further allege: "The Delaware Attorney General is currently prosecuting a lawsuit against eighty-six defendants, including seventeen Delaware incorporated companies, under the Delaware False Claims Act.. .seeking treble damages and attorneys' fees and costs, for failure of the Delaware incorporated entities to escheat unredeemed gift cards issued by third- party special purposes entities organized in other states." (D.I. 1 ...


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